Finding the right strategy for affording college to minimize the burden of student loans.
Figuring out how to afford college without relying on student loans is essential. Roughly 62% of students who graduated in 2018 left school with student loans. The average amount of debt was a whopping $29,800. [1] Each year, the cost of both tuition and room and board rises. In fact, the cost of higher education is 129% higher than it was 30 years ago.[2]
Affording college – whether it’s for you or your children – can be a huge burden. So, it’s essential to start planning early to pay for as much as you can without student loans. But even if you’re starting late, there can still be solutions that can make college more affordable. Watch this on-demand webinar to learn how.
Welcome to our Affording College Webinar.
So, let’s get the scary stuff out of the way first. The numbers. Try not to get intimidated. These numbers are from the college board for the 2016-2017 school year. So, clearly, these numbers can be pretty high, but what are our options?
I want to talk about various options, and how to deal with them. We have – paying out of pocket, scholarships and grants. Student loans and a combination of them all!
Pay out of pocket may seem incredibly overwhelming and daunting, but for some, it may not be the worst choice. It depends on what you want. Most high school students aren’t taught the value of budgeting and saving so when it comes time for college, you might be on your own.
You may have to go to school locally rather than far away, but you can live at home and save money. Statistics show it costs approximately $10,000 for housing.
College classes are expensive, but the tax refund you get for paying for school is can be HUGE! To give you an example… someone I know went to college and paid for two classes out of pocket to finish their degree. Paying for these two classes added over $2,000 to their tax refund. Now, obviously this is a specific situation. But, if you are able to get scholarships and grants to help out, you actually sometimes come out on top.
Working while you go to school is an option as well and it provides you with one of the best things you can have – Work Experience
Let’s talk about Scholarships. What is a scholarship?
A Scholarship is a grant or payment made to support a student’s education, awarded on the basis of academic or other achievement. Scholarships do NOT have to be paid back.
You can apply for scholarships as early as freshmen year of high school. If you win a scholarship before you know which college you’ll attend, the scholarship organization will either write you a check if you promise to use the money for college or will give you the money when you decide where to go. Don’t wait until your college plans are finalized to apply for scholarships.
You should not have to pay fees to apply for a Scholarship. They are designed to help you.
Most scholarships that are renewable, which means that you win them for more than one year, if you meet the requirements. These requirements are usually that you continue to attend the same college, maintain a certain GPA or keep the same major. When you win a scholarship, ask the organization what you need to do to maintain your award. In most cases, you’ll need to basically keep the status quo.
One of the biggest mistakes that many students make is that they stop applying for scholarships once they graduate from high school.
There are literally thousands of scholarships for students in college and even graduate students. Some of these awards are only open to students who are already in college. Your financial aid office and your major’s department are two of the best sources for these kinds of awards.
Essays are the best way for scholarship judges to get to know you beyond your grades. There are some scholarships that don’t require essays, especially ones for art, music or other types of awards that require a portfolio or project instead.
There are two types of scholarships: need-based and merit-based. As the name suggests, need-based scholarships are based on your financial need and your parents’ income. Merit-based scholarships are based on academic or extracurricular achievements. Your parents’ income is not a factor for merit-based scholarships.
A Grant is a special type of Scholarship.
A Grant is usually what is called “need based.” And it is typically for students who come from low-income families.
Like a scholarship, a grant does not need to be paid back.
For undergraduates, the most common grant is the Pell Grant. This will take into account your income and your parent’s income. If you meet the criteria, you’ll be eligible for assistance.
Depending on how many classes you take, you can get as much as $5,700 a year from a pell grant. Any extra that does not need to go to tuition is yours to keep and can be used for books and related expenses.
It is important to note you have to reapply every year!
To get a grant, you will have to use what is called FAFSA.
The Free Application for Federal Student Aid it’s the application used by nearly all colleges and universities to determine eligibility for federal, state, and college-sponsored financial aid, including grants, educational loans, and work-study programs.
FAFSA Should be your first step when you are applying for financial aid! In some cases, Pell Grants given by FAFSA may be able to completely cover the cost of your education. If you are going to a local college and do not have to live on campus, the grants may be all you need.
To be eligible to submit a FAFSA you must meet the following criteria:
– You need to be a U.S. citizen, a U.S. national or an eligible non-citizen;
– have a valid Social Security Number;
– have a high school diploma or GED;
– are registered with the U.S. Selective Service (if you are a male aged 18-25);
– complete a FAFSA promising to use any federal aid for educational purposes;
– do not owe refunds on any federal student grants;
I strongly encourage all students to check with their school’s financial aid office to determine their exact FAFSA deadline requirements, and to file it as soon as possible after January 1st.
Remember that applying for scholarships is always FREE! We have seen many websites that offer to fill out the forms for you.
These sites sometimes charge as much as $80-$100 for something you can do yourself at no charge!
Here are some common scholarship scams that I want you to look out for!
Many scams encourage you to send them money up front but provide little or nothing in exchange. Usually victims write off the expense, thinking that they simply didn’t win the scholarship.
Next there is a scam looks just like a real scholarship program but requires an application fee. The typical scam receives 5,000 to 10,000 applications and charges fees of $5 to $35. These scams can afford to pay out a $1,000 scholarship or two and still pocket a hefty profit, if they happen to award any scholarships at all. Your odds of winning a scholarship are less than your chances of winning the lottery.
The Advanced Fee scam offers you an unusually low-interest loan with the requirement that you pay a fee before you receive the loan. When you pay the money, the promised loan never materializes.
Legitimate loan providers deduct any fees from the check. They never require an up-front fee when you submit the application. If the loan is not issued by a bank or other recognized lender, it is probably a scam.
The Scholarship Prize scam tells you that you’ve won a college scholarship worth thousands of dollars, but requires that you pay a “disbursement” or “redemption” fee or the taxes before they can release your prize.
If someone says you’ve won a prize and you don’t remember entering the contest or submitting an application, be suspicious.
– A Student loan is offered to students to pay education-related expenses, such as college tuition, room and board or textbooks.
– Many of these loans are offered to students at a lower interest rate, In general, students are not required to pay back these loans until the end of a grace period, which is usually 6 months after graduation.
Student Loans
– Typically, when you complete your FAFSA, you are also offered student loans.
– Stafford loans are the most common type of Federal Loan. Money for these loans comes directly from the federal government in a program called the Federal Direct Student Loan Program. There are two types of Stafford Loans: subsidized and unsubsidized.
– If your loan is subsidized, you won’t have to make payments until you graduate. Interest rate typically are at or below 6.8 percent. The government pays the interest while you’re in school. So, the interest won’t build up while you are a student.
– Subsidized loans are reserved for students who demonstrate a financial hardship. Most go to students whose families’ annual incomes are below $50,000.
– If you have an unsubsidized loan, you’re responsible for paying off all the interest. Interest builds up at a fixed rate of 6.8 percent while you’re in school, but payments are typically deferred — or postponed — until after you graduate.
– All students are eligible for this type of loan. So, while you are a student, you are not responsible for payments, but the amount you owe will continue to increase over time because the interest will keep adding up.
Perkins Loans are more desirable than Stafford Loans but have more eligibility rules.
Perkins Loans have a fixed interest rate of 5 percent. They are all subsidized, so the government pays the interest while you’re in school and for a short period after you graduate.
Perkins Loans are reserved for students who show exceptional financial need.
These loans are funded by the government but disbursed by each individual college or university.
The federal government distributes a limited amount of funds to each school, and the school determines which students to lend to.
PLUS loans are available for both parents and graduate students.
Parent PLUS loans are for parents of dependent undergraduate students, and Grad PLUS loans are for graduate students themselves.
Private education loans, are an option if other sources of financial aid do not fully cover the cost of school.
These loans are provided by private lenders and do not use government funding. Private education loans are more like regular personal loans
Your eligibility and interest rate depend on your credit score. Interest rates are typically higher than federally guaranteed education loans and borrowing terms vary by lender, so you must be diligent in understanding the terms, so you don’t end up with huge amounts of student loan debt after graduation.
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Remember, YOU are going to be paying this money back. If you take more then you need, you are responsible
• If you have unsubsidized loans, try to make payments towards the loan while you are still in school. The more you can pay now the less interest will accumulate.
• Typically, you’ll be offered both Subsidized and Unsubsidized loans. If you can get away with ONLY taking out Subsidized loans, do it. No interest builds up on these loans until after you graduate, so do your best to only get them.
After you graduate, your loans are not due for 6 months.
Okay, so now let’s talk about what not to do with student loans.
• DO NOT spend more than you need! If you take out money and you don’t need all of it, you can give back the excess. So, if you take out $4,000 and you only end up needing $2,000, just send the difference back to the student loan lender.
• DON’T take out student loans if you do not plan on FINISHING COLLEGE!
• Do not EVER miss a payment on your student loans, or any loan for that matter. One mistake can haunt you for up to 7 years!
With an average student loan payment of approximately $351, and a pay off period of around 18 years… that means the average person will pay more than $43,000 toward their student loans. Now, you may be asking how that makes sense if the average is $28,000 … well, that is because approximately $15,000 of it is going to interest.
This list is about the risks you run when taking out student loans. This is a worst case scenario, but let us say that one day you are strapped with debt. Tons of credit cards, or medical bills and just cannot get out of it. Bankruptcy may allow you to wipe the slate clean, with some consequences.
However most Student loans are not eligible in Bankruptcy.
Credit is important. Your credit is your profile that banks and lenders use to determine how reliable you are. It is also what landlords use to determine if they will rent to you. More than 50% of all employers use your credit to determine if they will hire you. Some jobs will also pull your credit before promoting you –
Imagine this snowball effect: You take out student loans. You get a degree. The job market isn’t hot for your degree right now, so you start making less than you are worth. You can’t pay your student loans, now your credit is destroyed and you cannot get housing, or a better job. This is a real life example of what can happen.
Thank you for joining out webinar! We hope you will check out some of the other topics we cover.
